The opposition, meanwhile, slammed the ruling BJP for increasing GST rates on essential commodities.

File image of Finance Minister Nirmala Sitharaman
Money Inflation Tuesday, August 02, 2022 - 09:45

India does not face any risk of either recession or stagflation as its macroeconomic fundamentals are "perfect", Finance Minister Nirmala Sitharaman said in the Lok Sabha on Monday, August 1. In a nearly two-hour long reply to a debate on price rise, she said India continues to be a fast-growing economy in the world, quoting reports of global agencies. Sitharaman said that India is doing better than its peers and "there is no question of India getting into recession or stagflation ... there is no question of us getting into stagflation or, like the US, a technical recession."

Not satisfied with the reply, the opposition led by the Congress staged a walkout. However, the Finance Minister continued that the GDP of the US fell 0.9% in the second quarter, following a 1.6% decline in the first quarter, marking the start of an unofficial recession. She further said, "A Bloomberg survey which was done by economists says there is zero probability of India slipping into recession, so it is not just me saying. There is zero probability of India slipping into recession even though there are several major economies who are in a substantially risky position of getting into recession."

On the macroeconomic fundamentals of the country, the Finance Minister said that the country's debt-to-GDP ratio is better than many developed nations, including Japan, and the GST collection has touched the second-highest since its rollout in July. Purchasing Managers' Index (PMI) touching an eight-month high is an indication that the Indian economy is getting more robust, she said.

Acknowledging that the country faces inflationary pressure, the Finance Minister claimed that the government has been able to contain it below 7% despite problems like COVID-19.  Efforts are being made to bring down retail inflation below 7%, the minister said. Hitting out at the UPA, she said, "Retail inflation was more than 9% in 22 months and inflation crossed double digit nine times during UPA regime time...We will bring inflation below 7% and inflation is coming down below inflation 7%."

However, the opposition continuously attacked the BJP government increasing GST rates on essential commodities. A 5% was levied on essential food items including pre-packed curd, paneer, honey, wheat jaggery, puffed rice (muri), among others, effective July 18. In addition, hotel rooms with tariff of up to Rs 1,000/day, maps and charts, including atlases, invited 12% GST, while 18% GST has been levied on tetra packs and fees charged by banks for the issue of cheques (loose or in book form).

Defending this, FM Nirmala said that the decision was unanimous and there was no difference of opinion on raising the rate, adding that it was done to plug leakages. The Finance Minister said that the GST compensation to states till May 2022 has been paid and only June month's dues are pending.

With regard to issuance of Rs 1.48 lakh crore oil bonds by the UPA regime, Sitharaman said, it was principally wrong and the burden of interest payment and principal repayment were transferred to the future generation. "Taxpayers of today are paying for subsidies dished out to consumers more than a decade ago in the name of oil bonds. And they will continue to pay for the next five years as the redemption of bonds continues till 2026," she said.

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